I rarely trade directly against a strong and intact trend, so consider this "hesitant advice" rather than anything concrete.
The DXY measures USD strength against a basket of currencies and weightings, and is closely watched by every serious market analyst. Therefore, looking at it directly for technical patterns and signals provides a trader with "what if" scenarios that can be applied to pair markets. E.g. if EUR/USD and DXY have matching signals, then that's a certain degree of confirmation to your idea. Note that this isn't the best example as EUR/USD is the biggest chunk of the DXY calculation.
Anyway, moving on...
DXY as at 31 October 2018 is sitting at a make or break level for the USD. It's been on a bull run since April, but has steadily been losing momentum over the last few months. Now, you should have been a USD bull in the absence of any contrary signals, and until today we haven't had any strong bearish confluence. But with DXY sitting at a strong weekly resistance level (indicator is of my own making - I'll provide screenshots below), with clear decreasing momentum (measured both by an indicator and swing angles), and a double top that has formed on the Daily/Weekly charts, we now have a trifecta of bearish signals that should give us, at the very least, a strong pause.
I'm not advocating that you suddenly rush out and long every XXX/USD pair you can find, as markets are chaotic and no analysis is worth a cent until you get confirmation. So, for me, confirmation is going to be a strong WEEKLY rejection from 97 on the DXY - at which point I'll tentatively start shorting the dollar.
Trade safe. Risk management is everything.
Cheers,
DD
The DXY measures USD strength against a basket of currencies and weightings, and is closely watched by every serious market analyst. Therefore, looking at it directly for technical patterns and signals provides a trader with "what if" scenarios that can be applied to pair markets. E.g. if EUR/USD and DXY have matching signals, then that's a certain degree of confirmation to your idea. Note that this isn't the best example as EUR/USD is the biggest chunk of the DXY calculation.
Anyway, moving on...
DXY as at 31 October 2018 is sitting at a make or break level for the USD. It's been on a bull run since April, but has steadily been losing momentum over the last few months. Now, you should have been a USD bull in the absence of any contrary signals, and until today we haven't had any strong bearish confluence. But with DXY sitting at a strong weekly resistance level (indicator is of my own making - I'll provide screenshots below), with clear decreasing momentum (measured both by an indicator and swing angles), and a double top that has formed on the Daily/Weekly charts, we now have a trifecta of bearish signals that should give us, at the very least, a strong pause.
I'm not advocating that you suddenly rush out and long every XXX/USD pair you can find, as markets are chaotic and no analysis is worth a cent until you get confirmation. So, for me, confirmation is going to be a strong WEEKLY rejection from 97 on the DXY - at which point I'll tentatively start shorting the dollar.
Trade safe. Risk management is everything.
Cheers,
DD
Comment:
Just a quick image to show the importance of the weekly resistance level mentioned above, and how it's provided strong levels of support/resistance over the last 4-5 years.
Comment:
Interestingly, but not unsurprisingly given the DXY weighting, EUR/USD and USD/JPY are both hitting their Weekly resistance levels (albeit from opposite directions)
EUR/USD:
USD/JPY:
EUR/USD:
USD/JPY:
Comment:
When looking at the DXY, it's always worth thinking about what makes up the value that you look at on screen. E.g. GBP/USD and EUR/USD (also to a lesser extent USD/CHF and USD/CAD) are fairly flat/stable at the moment.
So, if the DXY is still rising, slightly, you have to look at why. In our case it's the USD/JPY rampage this morning after weak JPY economic figures.
So, if the DXY is still rising, slightly, you have to look at why. In our case it's the USD/JPY rampage this morning after weak JPY economic figures.
Comment:
USD/JPY propped up DXY for a day, but the crash has just come. Would expect this to be, at the very least, the start of a downward movement over the next few weeks. Beyond that, we'll see.